Secondary bond market

Sub-1% 10-year municipals and low ratios may test investor appetite for the asset class but it is hard to ignore the strong fundamentals and substantial fund flows in the backdrop.

Four out of the six economic indicators released on Thursday surpassed expectations, with consumers tapping their savings to quench pent-up demand. U.S. Treasuries made gains but municipals stood on their own in an impressive two-day rally with insatiable demand.

The economy grew faster from late February through early April while consumer spending increased, with a possible rise in inflation in the near term, according to the Federal Reserve’s Beige Book released on Wednesday.

One-year municipal debt has fallen to record lows with benchmark yield curves at 0.05% and the 10-year muni has fallen below 1% while 30-year muni benchmark yields at or less than 10-year UST.

Rating agency moves on credits across the spectrum are pushing spread-tightening in munis, but the broader economy is still two years away from pre-pandemic levels, according to Federal Reserve Bank of Boston President Eric Rosengren.

Ratios aren't budging as municipal to UST outperformance is not abating. The three largest deals of the week will be taxable, increasing the demand component for exempt paper.

High-yield inflows return to the tune of $821 million. The 10-year triple-A hovers just above 1%.

The Investment Company Institute reported another week of inflows, $800-plus million, as participants focus on that part of the market as an indicator of how munis will fare during tax season.

The theme of low supply, positive inflows and the anticipation of higher tax rates led triple-A benchmarks firmer by one to two basis points.

The services sector showed improvement and employment made big gains in March, but economists note the labor market remains far from full employment.

Non-farm payrolls rose 916,000 in March, according to a Labor Department report Friday, while the unemployment rate fell to 6%.

Susan Courtney, head of the Municipal Bond Team at PGIM Fixed Income, talks inflation, muni credit in COVID times and infrastructure. (27 Minutes) Lynne Funk hosts.

Municipal bond industry leaders weighed in on their expectations for 2021 during a panel discussion at The Bond Buyer's National Outlook Conference.

Biden's $2 trillion infrastructure proposal, combined with the shortened week and the arrival of the second quarter, took attention away from the muni market.

Larger fund flows, lower supply and optimism surrounding issuer credit post-stimulus allowed for a March price reversal that avoids posting two consecutive months with losses. The consumer confidence index jumped to its highest reading in a year in March.

Municipals continue to outperform Treasuries amid a light holiday-shortened week led by a California tobacco deal.

A trio of municipal bond analysts say now is the time for investors to take advantage of the strength and resilience of the asset class.

Moody’s followed S&P in lifting Illinois’ outlook to stable, where it stood before the COVID-19 pandemic, but a lot more needs to happen for an upgrade.

Both personal income and expenditures dropped in February, while personal consumption expenditures also came in weaker than expected, meaning inflation remains in check for now.

Refinitiv Lipper reported more inflows into municipal bond mutual funds to the tune of $592.4 million. Initial jobless claims fell to the lowest point since the pandemic began, moving Treasuries weaker while equities saw gains.